Why is the Philippine peso so strong?

by Cathy Rose A. Garcia, ABS-CBNnews.com

MANILA, Philippines - Overseas Filipino workers and their families, as well as exporters and business process outsourcing companies, are feeling the pinch of a strong Philippine peso. But what is behind the rising value of the peso against the US dollar?

In an interview with DZMM's Noli de Castro on Wednesday morning, Bangko Sentral ng Pilipinas deputy governor Diwa Gunigundo sought to explain the reasons behind the peso's continued strength.

The BSP, Gunigundo said, has also been introducing measures to curb capital inflows and temper the peso's gains. This includes preventing overseas funds from investing in the BSP's special deposit accounts (SDA), and cutting the interest rates on these SDAs.

The peso has averaged P41.20 to a dollar in the fourth quarter last year from P41.90 in the third quarter. So far this year, the peso has already gained 1% to 40.64 against the dollar.

Many economists believe the peso will further strengthen this year. Investment banking giant Goldman Sachs recently said in a report that the peso-dollar exchange rate may reach P37.50 by the end of 2013.